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Wisconsin wires $60 million to Minnesota; Hopes high to reinstate income tax reciprocity soon

Gov. Walker was in Hudson Wednesday morning to announce that Wisconsin had wired more than $59 million to Minnesota Tuesday, clearing a tax debt.

He didn't come check in hand. The money had been wired Tuesday evening. But Gov. Scott Walker held a press conference Wednesday morning to announce that Wisconsin has paid off its $60 million tax reciprocity debt to Minnesota.

The announcement that Wisconsin has paid the $59,719,000 -- due last December -- was made at Airworthy Aerospace, a Hudson company with 50 workers, about 40% of whom live in Minnesota.

The conference was held the day after the 10th Senate District recall primary and just as campaigning for the Aug. 9 election moves into full swing. Walker and Wisconsin Secretary of Revenue Rick Chandler made it a point to credit Sen. Sheila Harsdorf (R-River Falls), a recall target, with keeping reciprocity talks alive.

As a small group of protestors milled around outside the plant, Walker reacted to the protest movements.

"I look at the recalls as a distraction from our focus of working together and putting people to work," said the Republican governor.

With this debt paid, the two states can move ahead with a reciprocity agreement to benefit both taxpayers and their employers, said Walker. He predicted the new agreement would be finalized within two months.

Renewing tax reciprocity would ease tax filing for over 55,000 Wisconsinites and 20,000 Minnesotans. Sixty percent of the people in Wisconsin impacted by reciprocity come from this region of western Wisconsin, said Walker.

Tax reciprocity is an agreement between governors, and he and Minnesota Gov. Mark Dayton have been talking about reinstating it, said Walker.

Until it was cancelled in 2009, the two states had an agreement that allowed people who live in one state and work in the other to pay income taxes and file tax returns only in their home state. Each state collected taxes from its residents and settled up with the other state. Wisconsin typically ended up owing Minnesota.

Reinstating the reciprocity agreement is part of his attempt to make it easier to do business in Wisconsin, said Walker. He said it simplifies things for taxpayers but also helps businesses that employ people on either side of the border.

"In our case we are putting our money where our mouth is," said Walker of Wisconsin's commitment to reciprocity.

This represents "a significant step forward toward getting a new reciprocity agreement in place," agreed Secretary Chandler. He said reinstatement talks with Minnesota officials have been "very cordial and very productive."

The first step, said Chandler, was to pay up Wisconsin's old debt.

"This is how government should be working for you, the residents and taxpayers," said Walker, acknowleding cooperation from Minnesota officials. Those officials included Sen. Ted Lillie, who represents the Stillwater to Woodbury, Minn., area, and attended the press conference.

Both Walker and Chandler praised Harsdorf for working with her counterparts in Minnesota.

Chandler said Harsdorf has been "the driving force all along" in emphasizing the importance of keeping reciprocity going.

"I could not go anyplace in the district without somebody talking about tax reciprocity," said Harsdorf of the importance the issue had to residents when it looked like the agreement would end.

"There's a border, but you know, the border's on paper," she said.

She said the governors of both states dropped the ball in 2009.

The reciprocity standoff made things difficult for people who live in one state and work in the other, agreed Todd Harmon, who lives in Cottage Grove, Minn., and works for Excel Energy in Hudson, and Steve Thein, who lives in Houlton and works for Ecolab in St. Paul.

"It was probably easier for me than other people," said Thein, who is a CPA and prepares his own tax returns. Still, he said, Minnesota taxes are higher.

With that, higher fuel costs and the Stillwater Bridge impasse, it's tempting to move back to Minnesota, said Thein.

The reciprocity breakdown has taken its toll on employers too, said Kevin and Andy Lindus, owners of Lindus Construction, which has customers in Minnesota and western Wisconsin.

Often, said Kevin Lindus, workers will spend half a day on a project in Minnesota and the second half on a project in Wisconsin.

"We have to separate that," said Lindus. "That becomes a burden to our office staff."

He said it cost his company $20,000 to update computer software to handle the taxation changes.

The loss of reciprocity also costs workers who have had to pay about $100 more to have their tax forms prepared, said Andy Lindus.

Airworthy, which also has locations in Houston, Texas, and Detroit, Mich., makes interior components for commercial aircraft. That work includes carpet cutting, overhauling wheels, changing tires and replacing seats.

The company was started in 2000 in Oakdale, Minn., and moved to its Hudson facility in 2004.

Judy Wiff has been regional editor for RiverTown’s Wisconsin newspapers since 1996. She holds a bachelor’s degree in journalism and sociology from UW-River Falls. She has worked as a reporter for several weekly newspapers in Wisconsin.